Commentary by Andrew Selden, President, United Rail Passenger Alliance
Amtrak recently told a U.S. Senator in writing (from an Amtrak senior executive officer) that elimination of all of the long distance trains (after transition costs) would increase its need for annual federal subsidy, because the same costs would continue to exist but be spread over a much smaller base of activity. That means, quite clearly, that the long distance trains at least break even on operations. While the argument over incremental vs. fully-allocated accounting is entertaining but probably unresolvable, the fact remains that Amtrak itself says that NO federal subsidy is being used to support operation of the long distance trains.
The Amtrak reports that purport to show operating losses in the long distance markets are fictional artifacts of management’s internal, unaudited, fully-allocated costing system (originally derived from the Pennsylvania Railroad and the old ICC Form A cost allocation program, designed to maximize allocation of fixed costs to the passenger services of the pre-Amtrak railroads). They do not reflect the disposition of annual federal subsidy cash, and unless Amtrak lied to a U.S. Senator, none of the subsidy goes to the long distance trains.
Amtrak’s own annual route performance data shows plainly that, measured by output expressed in passenger miles, and load factor, the long distance trains are by a wide margin the largest and strongest set of trains that Amtrak operates. They produce about half again the annual output of passenger transportation as does the NEC (in FY’14, about 2.761 billion PM vs 1.931 billion in the NEC). Even the several dispersed regional corridors elsewhere in the country regularly produce 105-110% of the passenger miles as does the NEC. Load factors in the long distance trains are higher to much higher than what Amtrak achieves in the NEC, showing simultaneously that the long distance trains are far more capital-efficient as well as being far more under-invested than the NEC. NEC load factors, which run just above 50%, show that Amtrak is materially over-invested there, since it cannot give away nearly half of its existing inventory.
Because the long distance trains require and consume no federal subsidy, it necessarily follows that they are Amtrak’s least subsidized segment. If you trace the actual use of Amtrak’s federal subsidy, net of excess contributions to RRTA totalling some $200 million a year, it is clear that the majority of the annual subsidy, totaling some three-quarters of a billion dollars a year, is used to prop up the costly infrastructure of the NEC. The NEC trains, accordingly, are by far Amtrak’s most heavily-subsidized, in gross and per passenger mile.
Amtrak’s social relevance in the NEC is dubious, since its market share there for intercity travel (using the BTS definition: non-recurring trips over 100 miles) is less than 2% according to data from the BTS, AAA, and other sources. In long distance markets, Amtrak’s market share varies, but often is in the range of 5%. Its average trip in the west is nearly 800 miles, matching the average trip on domestic airlines. Where Amtrak offers long distance trains, they compete quite well.
Finally, because Amtrak has “invested” about a hundred billion dollars into the NEC (in constant 2014 dollars) yet still has a trivial and declining market share and half-empty trains to show for it, the NEC has the dubious distinction of having not only consumed almost 100% of Amtrak’s annual free handouts from the federal government, but also achieved a negative rate of return on invested capital in the process.